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EUR/USD, US Dollar Talking Points:

- The US Dollar has broken-below the bullish trend-line that’s been at work for the past two months, and a bit of support has shown up around the familiar Fibonacci level of 96.47. This is the 23.6% retracement of the 2011-2017 major move in the US Dollar and had last come into play two weeks ago. This has helped EUR/USD to push above the 1.1400 level after failing there last week, and this extends a pattern of higher-highs and lows in the pair.

- Tomorrow is a market holiday as US markets are closed for an official day of mourning to mark the passing of former US President, George H.W. Bush. The Jerome Powell semi-annual Humphrey Hawkins testimony has been cancelled, and this comes after his comments last week provided a strong boost to the risk trade.

This week’s economic calendar may have caught a bit of relief after Jerome Powell’s semi-annual Humphrey Hawkins testimony was postponed. Tomorrow, US markets will be closed for an official day of mourning for former US President, George H.W. Bush; and with D.C. out of the office, Chair Powell’s speech has postponed to a yet-to-be-named date. This comes at a key time as Chair Powell’s comments last week provided a quick and strong boost to equity prices.

Last week saw a shift in the language of the Fed Chair, and this helped to provide a sense of support to equities after what had become a troubling prior seven weeks of price action. US stocks turned in early-October after Chair Powell opined that the Fed was ‘a long way’ from the neutral rate, which is the theoretical interest rate at the bank in which policy is neither stimulative nor restrictive. Those comments in early-October were heavily inferred to mean that the Fed had plans for even more interest rate hikes in 2019, and in short order the bullish breakouts that drove equity prices higher throughout Q3 were taking a bearish turn.

That led to a quick gap-higher as futures opened for trade on Sunday, and prices pushed above the 26k level temporarily ahead of the US open. When US equity markets did open for the day, that pullback extended; but thus far buyers have held-up prices above the key area on the chart around 25,500. On the hourly chart below, a series of lower-lows and lower highs remains in short-term price action. The key for the next couple of days would be to see support set-in so that higher-highs and higher-lows begin to show again; and that could open the door to bullish continuation strategies.

US Dollar Hourly Price Chart

The next major area of support interest on the pair is the zone that helped to arrest the lows three weeks ago, and this runs around the 96.04 level which is the 50% marker of the 2017-2018 down-trend in the currency. A bit deeper, around 95.86 is another level of interest, as this is the 50% mid-point of the 2001-2008 major move in DXY. This zone came in to help set resistance on two separate occasions in October before buyers were finally able to push through, and once that happened the same price zone helped to set support in early-November.

US Dollar Eight-Hour Price Chart

GBP/USD Rallies After the EU Dangles ‘Remain-Route Carrot’ in Front of the UK

But the challenge remains: Will GBP/USD be able to elicit fresh sellers upon breaks of this support? And if so, for how long might that move extend? This makes for a rather complicated backdrop, as there is little optimism currently showing around the matter, yet sellers haven’t been able to make much ground below 1.2700 so far this year. As Martin Essex discussed, the upcoming House of Commons vote appears unlikely to pass, and that failure could bring on four different scenarios, none of which appear to be very positive for the Pound.

At this point, a prior area of resistance offers higher-low support potential, and this takes place around a confluent area on the chart with two different Fibonacci levels in close proximity. The price of .6877 is the 50% marker of the 2015-2017 major move, and the level of .6871 is the 50% marker of the 2009-2011 move. This zone helped to hold the highs on two separate occasions last month; and price action this week gapped above this level, leaving a bit of unfilled gap on the chart. This becomes an area of interest for higher-low support for bullish continuation strategies in NZD/USD.

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